Point-of-Sale Financing

More Growers are seeking flexible financing programs to expand their acreages, shift more acres to corn or simply manage payments for crop inputs. And increasingly, they are finding those financing programs at their local ag retailer, cooperative or seed company.

Farm Plan

Some 7,000 ag retailers across the United States offer growers financing through John Deere Credit's Farm Plan program.

Farm Plan features flexible monthly payment terms at the point of sale and offers growers convenient record keeping with transaction-level detail for their tax records, says Jayma Sandquist, director of sales and marketing, John Deere Credit, Johnston, IA. Details such as product description, number of units, unit price and extended price are printed on the monthly Farm Plan statement and are available at www.FarmPlan.com.

A key to this financing program is its flexibility, Sandquist says. Farmers can use it for everyday purchases as well as larger purchases, such as seed and crop protection, with seasonal repayment terms.

For 2008, participating retailers will offer full-season programs through Farm Plan, with terms available beginning early in the fall, during the preplanning and planting seasons, and with payment due after the crops are harvested.

Financing through Farm Plan reduces costs for ag retailers and seed companies, which in turn allows the retailer to offer better pricing terms to the grower — early-season discounts or lower-rate financing, for example, Sandquist says.

“FarmPlan offers growers a secure financing option outside a typical farm loan program. If we can take care of their order and arrange for payment in the same process, that makes sense from a business perspective,” says Dan Sartell, marketing manager, Wensman Seed, which markets corn and soybean seed primarily in Minnesota, North Dakota and South Dakota.

Wensman Seed's customers who order seed before November 30 can qualify for an 8% discount, and if they commit to the order by November 30, they are eligible for financing the seed at three points below the prime interest rate, says Sartell, adding that growers can use the cash discount to offset the cost of borrowing.

Although Wensman Seed does incur a cost to offering financing at three points below prime, its dealers are collecting payment at the time they write the order. “That means a lot to the business transaction,” Sartell says.

“Our customers like the program because they can separate out the seed portion of their input costs. It helps them manage their operations,” Sartell says. He notes that the financing program enables them to buy seed within that tax year or defer their payment until the year after.

The Farm Plan finance application form is just one page. “We can do the credit qualification online and let customers know if they are eligible within a couple of days,” Sartell says.

Renk Seed, Sun Prairie, WI, was one of the first seed companies to offer Farm Plan, beginning in 1990. “It's another tool that we use to help keep customers satisfied,” says Alex Renk, the company's CFO. Renk Seed serves corn, alfalfa and soybean growers in the upper Midwest. Its sales territory spans the Dakotas, Minnesota, Wisconsin, Michigan and parts of northern Illinois and northern Iowa.

Farm Plan gives Renk Seed's customers the option of paying after their crop is harvested. The financing program has helped the seed company build its customer base over the years, Renk says, adding that a 0% interest program offered last year attracted several new customers.

Rabo AgriFinance

Rabo AgriFinance, another large lender, works with retailers and seed companies to offer flexible financing to farmers. For the 2008 growing season, many of the retailers and seed companies that offer financing through Rabo AgriFinance will offer interest rate incentives ranging from prime +1% to 0%, says Tom Levasseur, managing director, Rabo AgriFinance, Cedar Falls, IA.

“We work closely with suppliers to develop programs that are customized to meet the needs of their farmers,” he says. “These suppliers are very good when it comes to understanding the needs of farmers, which means financing programs work from the beginning.” Rabo AgriFinance charges competitive administrative fees that allow suppliers to pass savings on to farmers in the form of interest rate buy-downs or lower input prices, he adds.

In all of the programs, the retailer and seed company have no responsibility for financing or administering the loans, which helps them manage risk and free up working capital to invest in more strategic parts of their businesses.

Rabo AgriFinance develops its financing programs in conjunction with suppliers to maximize access to cash discounts. It has a simple application and approval process that includes preapprovals. Most programs are co-branded with the sponsoring retailer or seed company.

ProPartners Financial

Working with the Land O'Lakes Seed Division, ProPartners Financial makes Ag Financing Solutions (AFS), a seed financing program, available to seed customers who purchase Croplan Genetics brand seed. AFS also is available through other retail channels for customers who buy W-L Alfalfa, America's Alfalfa, Forage First and Hytest Seeds.

Land O'Lakes Seed Division, Shoreview, MN, began offering seed-only financing programs through its member cooperatives in 2005. This year, it also offered financing for AgriSolutions crop protection products and other crop inputs for those who met the seed financing requirements, says Kevin Eye, sales director, Western U.S., Land O'Lakes Seed Division.

For 2008, the cooperative's customers who meet the same qualifications also can finance NutriSave forage inoculants through AFS.

To keep its financing programs as simple as possible, AFS offers four pricing options — from prime -2% down to 0% financing. With the rising costs of crop inputs as well as land rent, farmers are looking for short-term financing from sources other than their traditional lenders, says Eye, adding that this type of financing is a “win” for growers because it spreads their risks.

ProPartners Financial also works with Growmark to offer the FS Agri-Finance (FSAF) program. The FSAF program reduces financial risk to Growmark's member cooperatives and increases their cash flow, says Gary Nebergall, FS/Growmark, Bloomington, IL.

The FSAF program also ensures that the cooperative's customers are “getting the best possible discounts in their input pricing along with saving them service charges,” Nebergall says.

Howard Huebner, vice president, business development, ProPartners Financial, says the cooperatives are a reliable source for crop inputs and financing and the programs offer farmers an opportunity to work with people who know their operations. “Customer surveys have indicated a high level of satisfaction and a high percentage of repeat customers,” he says.

NK Seeds

NK Seeds, a business unit of Syngenta Seeds, Golden Valley, MN, offers financing through its retail partners as the primary option to “simplify grower requirements and steps in the process,” says Jamie Leifker, NK marketing manager with Syngenta Seeds. “This will allow the retailer to bundle offers for the grower that include more than just seed and will allow the retailer to position the full acre solution for the grower.”

Leifker notes that work is being done to offer complete seed and crop protection financing that will include both NK Seed and Syngenta Crop Protection products.

NK Seeds' financing program provides retailers the flexibility to customize their offers to growers. “Many times, one-size-fits-all financing offers only fit some growers,” Leifker says. “Managing financing through our retailers also gives the grower one place that they can go to get money versus filling out multiple financing applications.”

Among retailers offering the NK Seeds financing program is Frontier FS Cooperative, Jefferson, WI. The full-service cooperative, which also uses the FS Agri-Finance program, has 15 outlets serving 17 counties in Wisconsin.

Operations manager Bruce Barganz says customers can take advantage of the early order discount (7% this past year) and defer payment until the following December. When the cooperative can lock up sales early, it can take position early on inventory and help subsidize the customer's finance interest rate, Barganz explains.

To be eligible for the NK Seed financing program, growers must buy a minimum of $7,500 worth of seed through the cooperative.

Monsanto FarmFlex, FlexPlus

Monsanto Company has developed FarmFlex, which encompasses cash discounts and 0% interest seed financing for seed-only purchases or FlexPlus for both seed and crop protection purchases.

For Dekalb and Asgrow seed purchases, Monsanto offers three options under the FarmFlex program umbrella. Growers can take advantage of an early cash discount (percentage discounts vary upon month of purchase), get a fixed 0% interest rate financing on their seed purchases, or finance both eligible seed and crop protection purchases with the FlexPlus option. This option offers an early commitment discount for seed and an attractive interest rate (prime -2% through January of 2008).

Growers must purchase a minimum of $7,500 worth of seed to be eligible for the 0% seed financing option or $2,500 for the FlexPlus financing option.

United Prairie LLC, a full-service ag retailer with four locations serving 15 central Illinois counties, offers its customers FarmFlex as a financing option.

Most crop input companies will need to offer an easy-to-use financing program to remain competitive, says Todd Shunk, seed specialist, United Prairie, Tolono, IL. He says the 0% seed financing program through Monsanto, for example, has been well received because of its simplicity.

Pioneer Hi-Bred International

Growers who purchase seed from Pioneer Hi-Bred International, a DuPont business, are eligible for simple payment terms under its Commitment Reward program, whether they pay cash for their seed purchases or prefer to use financing options from Pioneer.

For cash customers, the Commitment Rewards program discounts are as high as 9% for early purchases. For growers financing seed purchases using Pioneer's Deferred Payment program, the discount is as high as 8% for early purchases. The interest rate for financing through the Deferred Payment program is prime -1% no matter when the seed is purchased.

Pioneer also offers a Quantity Savings program — the greater the purchase, the greater the savings.

Growers who want to purchase both seed and crop protection can use the TruChoice Opportunity program to finance DuPont-approved crop protection products and other approved third-party products at the same interest rate of prime -1% (no minimum purchase).

Pioneer encourages customers to discuss their operations with their local Pioneer sales representatives before selecting a program. “We like to have a discussion with the grower, going over field-by-field needs,” Frazier says. “It's important to select the right products first, then talk about financing options.”